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Schlumberger Faces Sanctions Over Suit Against Ex-GC

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Share us on: By Jeremy Heallen

Law360, Houston (July 16, 2014, 5:05 PM ET) — A Texas judge said Wednesday he was inclined to sanction Schlumberger Ltd. for suing its former chief intellectual property attorney because he doubts the company can prove the attorney misappropriated trade secrets to benefit her new employer, Acacia Research Group.

Harris County District Judge R. K. Sandill told lawyers for Schlumberger that he was leaning toward granting a motion to dismiss Charlotte Rutherford filed under the Texas Citizens’ Participation Act and enter a statutorily required award of attorneys’ fees against the oilfield giant, citing a lack of specific evidence connecting what Rutherford knows about the scope of Schlumberger’s patents to Acacia’s decision to sue it for infringement.

Although he agreed that Schlumberger’s suit is likely barred by the TCPA — a state law that aims to curb so-called strategic lawsuits against public participation — Judge Sandill said that before he could consider the motion, Rutherford had to respond to about 20 questions Schlumberger posed during her deposition, several of which she refused to answer citing attorney-client privilege.

“Right now, I want to grant the anti-SLAPP motion but the assertion of privilege has been way too broad,” Judge Sandill said. “I don’t want there to be a due process issue when [the case] goes up on appeal.”

Judge Sandill was set to hear Rutherford’s motion Wednesday morning, but deferred in favor of resolving her deposition objections first. Rutherford has insisted that Schlumberger is fishing for information it can use to undercut Acacia’s patent infringement suit and which bears no relevance to the suit against her.

But Schlumberger said it needs specifics about Rutherford’s advice relative to Acacia’s business tactics in order to attempt to survive her motion to dismiss. Among other things, Schlumberger said it hopes to prove that Rutherford used her knowledge of gaps in the company’s intellectual property to help Acacia identify a patent it could purchase and then sue Schlumberger for infringing.

Rutherford said such evidence doesn’t exist and what Schlumberger is really after is a list of Acacia’s acquisition targets so it can buy them first.

For about an hour and a half, lawyers for Schlumberger and Rutherford argued about the appropriateness of Rutherford’s privilege claim, which is complicated by the fact that she not only serves as inside counsel for Acacia, but is also involved in business development.

Judge Sandill said that because Acacia is a patent holding company “whose business model is to litigate,” any conversations Rutherford had with her employer about advancing that agenda, such as recommending which patents to target and what companies to sue, is not covered by the attorney-client privilege because such advice relates to Acacia’s business decisions and not its legal strategies.

After overruling most of Rutherford’s privilege objections, Judge Sandill permitted Schlumberger to resume its deposition of Rutherford, which is scheduled to take place Thursday afternoon at the courthouse.

But Schlumberger will face an uphill battle when Judge Sandill eventually takes up Rutherford’s TCPA motion, which has to be heard no later than Aug. 24.

Earlier in the hearing, Rutherford’s attorney, Joseph Y. Ahmad of Ahmad Zavitsanos Anaipakos Alavi & Mensing PC argued that regardless of what Schlumberger learns from Rutherford, it would likely not be enough under the TCPA to support the company’s argument that she breached her fiduciary obligations.

“Without being disrespectful to Schlumberger, I agree,” Judge Sandill said. “I don’t think there is any merit to this case and if I were to rule on the motion today, I would grant it and award sanctions.”

Schlumberger filed the suit in March, alleging Rutherford, who worked for Schlumberger from 2006 until May 2013 and had served as the company’s director of intellectual property, “unlawfully appropriated, secured or stole” Schlumberger trade secrets in her final days with the company.

Schlumberger said Rutherford stole confidential trade secret data and information that was copied onto USB hard drives and deleted from her company-issued laptop shortly before her departure from the company to join Acacia, which later sued Schlumberger for infringing a patent that Rutherford allegedly recommended for acquisition.

Schlumberger is represented by Craig Smyser and Land Murphy of Smyser Kaplan & Veselka LLP.

Rutherford is represented by Joseph Y. Ahmad, John Zavitsanos, Timothy C. Shelby and Adam Milasincic of Ahmad Zavitsanos Anaipakos Alavi & Mensing PC, Ashish Mahendru and Darren A. Braun of Mahendru PC and Richard B. Specter of Corbett Steelman & Specter.

The case is Schlumberger Ltd. v. Rutherford, case number 2014-13621, in the 127th Judicial District Court of Harris County, Texas.

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